Key Sectors For Investment - Tourism and Leisure

Sector Overview

The tourism sector has been experiencing an impressive growth both in terms of tourist arrivals and in foreign exchange revenues after the restoration of peace and normalcy in the country in 2009. Achieving another remarkable milestone in the country's booming tourism industry, tourist arrivals reached half million in 2014, an increase of 20% over 2013 and foreign exchange earnings exceeded US$ 2.4 billion, an increase of 41% over 2013.

The Sri Lankan government has identified the Tourism sector as a key growth area in post-conflict development with an ambitious target of attracting 2.5 million visitors by 2016. The Board of Investment (BOI), the agency tasked with attracting Foreign Direct Investments (FDI) to Sri Lanka, has been playing a pivotal role in executing this strategy, by attracting top tier tourism and hotel investors to the country. Companies that have already committed major investments include the premier Asian luxury hotel chain, the Shangri-La Group (Hong Kong/Singapore), India's upscale ITC Group, Thailand's Minor Group, Spain's RIU Hotels & Resorts, Singapore's Aman Resorts, Banyan Tree Group Singapore and the Mustafa Group of Singapore.

Furthermore, international brands such as the Sheraton brand of Starwood Hotels and Resorts, Marriott International, Grand Hyatt brand of Hyatt Hotels Corporation, Movenpick Hotels & Resorts Management and Onyx Hospitality Group have signed management agreements with local hotel companies.

The Sri Lanka government has identified some key areas for tourism development and is promoting them for hotel and resort projects. These destinations are Kuchchaveli in Trincomalee district on the north-eastern coast, Passikudah on the east coast, Kalpitiya on the north western coast consisting of 14 different islands, and Dedduwa near the river Madhu Ganga located close to Bentota on the south western coast.

As tourism arrivals have continuously increased since the end of the conflict in May 2009, the Sri Lankan government is ensuring that the building blocks for economic growth are being developed simultaneously with major infrastructure projects such as expressways, airports and seaports.

Sri Lanka's first ever expressway from the capital Colombo to the southern hub of Galle was opened in November 2011, greatly reducing travel time. The construction of the Colombo to Katunayake Expressway connecting to the international airport was completed in the second half of 2013. Additionally plans for highways from Katunayake to Anuradhapura in the Cultural Triangle, Colombo to the hill capital Kandy and from Anuradhapura to Jaffna at the northern tip of the country are being finalized.

To provide an alternate to the international airport outside Colombo, and to develop the tourism sector in the South and the East of the country, Sri Lanka opened its second international airport at Mattala in the southern Hambantota district. An expansion of the existing airport in Katunayake is in progress, with the addition of another passenger terminal and expanded cargo handling facilities. Several airlines have expressed interest in starting flights to Sri Lanka and current operators have almost doubled the frequency of their flights into the country to cater to the rising demand. As well, domestic airline services are being developed and some of the companies have started domestic airline services to cater the market. Also, Sri Lankan Airlines has commenced seaplane operations connecting Colombo to 12 destinations within the country to make different tourist destinations across the country more accessible.

Considering significant growth in the industry, one of the most prestigious global travel publications, the largest travel guide book and digital media publisher in the world "Lonely Planet", has ranked Sri Lanka as the Best Country to Visit in 2013. In its effusive article on Sri Lanka, Lonely Planet said, "Investment is fuelling the tourism industry and visitor numbers are steadily increasing. Prices are affordable and with affordable flights from the convenient travel hub of Bangkok, Sri Lanka is emerging as one of the planet's best value destinations."

One of the main advantages of Sri Lanka as a tourism destination is the varied attractions available, and now increasingly accessible with the development of the underlying infrastructure by the government. As Lonely Planet notes although Sri Lanka has traditionally been known as a predominantly a beach destination, it offers culture, nature, agro, community, religious and spiritual attractions. "Endless beaches, timeless ruins, welcoming people, oodles of elephants, killer surf, cheap prices, fun trains famous tea, and flavorful food is an experience that will fascinate any traveller."

Given the very high interest among global travellers in Sri Lanka, there is a very strong opportunity for investors of hotels, resorts, and leisure & entertainment complexes to profit from the growth of this sector.